Bitcoin Cash: Year in Review

The split of the bitcoin blockchain and the distinction between Bitcoin Core and Bitcoin Cash celebrated its first birthday on August 1st, 2018. That’s right; it’s been over a year since the hard fork between Bitcoin Cash and Bitcoin Core.

Bitcoin and Bitcoin Cash Hardfork

It is important to note that Bitcoin Cash and Bitcoin Core shared the same genesis block of 2008 and the same blockchain history up until the fork of last year. In other words, both coins were the same coin until the fork. After the chain split on August 1st, 2017 two “sibling-chains” (BTC and BCH) were created from that moment onwards with unique blockchains. Over 17 million Bitcoin were mined by the time of the fork, making the investment before the fork more significant in quantity than any investment in BTC or BCH after the fork. The contention between BTC and BCH relies mostly in the value of investors of Bitcoin before the fork of last year; since that is where most of the BTC and BCH that will ever exist are already held. This hard fork took place after many years of debate on how to scale Bitcoin. The block size was one of many issues concerning scaling. Other issues included the turning on of Op-Codes for smart contract functionality, the fungibility of anonymity, and differing perspectives regarding monetary theory.

Satoshi’s white paper, written in 2008, detailed Bitcoin as a peer-to-peer electronic cash system that would allow people to transact without the need for a central authority by utilizing cryptography. Bitcoin originated as a cypherpunk initiative as prophesied in Timothy C. May’s Crypto-Anarchist Manifesto of 1992. The main disputes that occurred within Bitcoin and will continue within forks of Bitcoin and crypto at large will originate around the philosophical differences within communities. Will Bitcoin forks and cryptocurrencies turn into surveillance coins compliant with the state, or will they become fungible and mediums of voluntary p2p exchange?

So why did this split take place?

The main issues of disagreement were block sizes, irreversibility of transactions, ownership of the Bitcoin brand and network effect, fees, processing time and ease of use and mass adoption.

Block Sizes:

Bitcoin Core is still at 1MB while Bitcoin Cash increased to 8MG during the split. Bitcoin Cash then increased to 32 MB per block. VISA can handle over 24,000 transactions per second, and Bitcoin Core and Bitcoin Cash had differing ideas on how to reach that level.

Bitcoin Core’s solution was to have side chains (or having transactions on a parallel blockchain) or a second layer like the Lightning Network (which has transactions off chain that are not recorded on the Bitcoin blockchain except at its open or close). They also aimed to implement “Segregated Witness,” a protocol that allowed less data to be referenced when confirming a transaction. Bitcoin Cash’s plan was to increase the block sizes and plans to keep doing so as needed.

Although Bitcoin Cash has had a successful year getting on multiple exchanges, and new vendors on board, but not all has been rosy in the Bitcoin Cash community since the split.

In the Bitcoin Cash community, upgrades are done via hard forks but this does not mean they are going to create a new coin. The community has scheduled hard forks in November of 2018 and of May 2019. However, there was the potential for an actual split to competing chains because of disagreements to the code of nChain and Bitcoin ABC.

The prevailing thought is that most of the community will follow Bitcoin Unlimited – it’s the same game plan but with differing timelines on when to implement certain features. Bitcoin Unlimited is acting as the mediating technology using both nChain and ABC’s upgrades to complement each other.

Bitcoin ABC:

Bitcoin ABC is the first software to implement Bitcoin Cash on-chain scaling. Their two-pronged approach to scaling is to remove immediate implementation bottlenecks increasing the block size limit and lay the technical groundwork for massive future on-chain scaling. These changes will reduce network spam and modify the fee structure to make the average transaction cheaper. These changes will run on testnet on October 15th, 2018 in anticipation of the network growing too large.

nChain:

On August 16th, 2018, nChain announced a new Bitcoin Cash full node implementation called Bitcoin SV (Satoshi’s Vision) at the request of miners and the mining pool Coingeek. Bitcoin SV will implement 128 MB blocks, remove the limit of 201 opcodes per script, and will restore more original Satoshi opcodes.

Bitcoin Unlimited:

Bitcoin Unlimited provides a voice to all stakeholders in the Bitcoin ecosystem. Adjustable block-size caps allows node operators and miners to easily adjust the size of blocks without having to restart the node or recompile new executables.

Xtreme thin blocks fix the issue of transactions being received twice by each node and reduces the number of required bytes. Parallel validation allows nodes to validate more than one block at the same time as new transactions.

Fees, Processing Time & Usability:

Since the fork, Bitcoin Cash is being used… as cash! From August 1st, 2018 Bitcoin Cash miners have processed nearly 63,000 blocks, and the network is ahead of Bitcoin Core by 6,800 blocks. This is exciting for Bitcoin Cash as they intended to increase the block size and eliminate “Replace by Fee” or RBF to allow the processing of more transactions- including microtransactions.

Having transaction fees that are fractions of a penny have allowed for instant settlement with 0 confirmations. 0-conf is the state your transaction is in before it has been included in a block, mined, and confirmed by a node.

Microtransactions of Bitcoin Cash have increased, like buying a cup of coffee here in the US or allowing people to eat in Venezuela, where monetary inflation has increased 40,000%.

Their social media payouts have also contributed to an increase in microtransactions on sites like Memo, Yours.org, TipperBots, Reddit and Twitter.

From Aug 1, 2017, to October 22nd, 2017 Bitcoin Cash averaged between 6,000-12,000 transactions per day. From October 22nd to February 7th, 2018 average increased to 20,000-60,000 per day. As the overall market dipped February 7th to June 30th, 2018 Bitcoin Cash averaged 20,000 per day again.

The Future of Bitcoin Cash

Although colored coins were originally thought to be used on Bitcoin Core before the fork, the Core community has abandoned the idea, and the Bitcoin Cash community has implemented colored coins. Colored coins are layered on top of Bitcoin and “colored” with specific attributes making them usable as tokens to represent anything, including assets. Imagine being able to erase the writing off a $20 bill and put “Melissa money” on top of it, instead of me making a separate Melissa currency with a separate blockchain, and I just used the currency to create my own token. It’s still a $20 bill, but colored coins help reduce the need for every ICO to have a token sale, which just adds a lot of noise, confusion, and conversions to the ecosystem.

When most people hear about Smart Contracts they think those are only built on Ethereum, but Bitcoin Cash has smart contracts too! Their smart contract protocol layer is called Wormhole and is built using OmniLayer. OmniLayer is the token-issuance protocol that is the same technical basis for Tether (USDT).

Neither Bitcoin Cash or Bitcoin Core have privacy set as the default on-chain. There are multiple projects that bring more privacy to Bitcoin. One of these is called MimbleWimble which is a proposal for a bitcoin-like blockchain that would be used as a sidechain or in the future an extension block scheme that would work as an integrated sidechain.

How Has Bitcoin Cash’s First Year Gone?

Despite all the debate between communities, the objective truth is that Bitcoin Cash is being used as cash, proving Bitcoin Cash’s utility to be more aligned with the vision held in Satoshi’s white paper. The store of value happens on chain for all transactions which is more trustworthy than a second layer. In the year since it’s creation, Bitcoin Cash has expanded onto 19 different services, like Bitpay or Coindance, is tradable on 41 different exchanges and is involved in 14 different projects like OpenBazaar or Counterparty. Their long-term approach is striving to be a medium of exchange for merchants and consumers which is important for mass adoption.

However, smart investors always diversify their portfolio. Hodl both and see what happens, but Bitcoin Cash is having a successful year.